We investigate whether institutional investors ameliorate or exacerbate the short-termist pressures on public firms in this paper. Relying on index assignments that generate plausibly exogenous variations in institutional ownership, we find firms with higher institutional ownership are less likely to be affected by short-termist pressures. Firms with higher institutional ownership invest more in terms of research & development. They obtain more patents and receive more citations on their patents. The results are robust to a battery of robustness tests and are consistent with a view that institutional investors ameliorate the short-termist pressures on public firms.

Keywords: Corporate Investment; Innovation; Institutional Ownership; Short-Termism; Regression- Discontinuity Design.